Thank you very much.
The Investment Counsel Association of Canada is the representative entity for investment counsel and portfolio management firms that manage in excess of $500 billion on behalf of Canadians. Much of that money is pension money.
It is our view that to ensure the future economic health and prosperity of Canada, employees and the employers managing money for them must be able to save for retirement to reduce the burden on future generations. This is particularly important with the pending baby boom demographic event, which all of you are aware of, and also with the defined benefit pension crisis we're faced with.
As a small economy—we're 3% to 4% of the global market—Canadians must be able to invest abroad, a fact recognized last year with the removal of the foreign content limit.
The issues I'm raising today are not just those relating to the Investment Counsel Association of Canada and its members. These are issues that affect all Canadians—$800 billion of pension assets, $600 billion in the mutual funds, another $250 million in non-registered savings, and 5.6 million people with group RRSPs. I'm going to talk about three issues that are materially important to them, and I really hope the committee recognizes their significance.
The first topic is to expedite the process to recognize foreign stock exchanges. The second issue is to reduce the arbitrary 150 unitholder threshold to achieve mutual fund trust status for a unit trust. It sounds technical, and I'll get into that very shortly. The third issue is to call for a fresh approach to the proposed amendments to the Income Tax Act, dealing with offshore investments. And to the financial services community and pension managers, the FIE and NRT rules are treated akin to the gun registry rules. But we'll get into that in a minute.
Briefly, on the first topic, there are about 200 stock exchanges in the world, but only 36 are recognized under the Income Tax Act of Canada. In an increasingly global world, that is just not acceptable, and this has a material impact. An RRSP can only invest in an issue listed on one of those 36 exchanges. We would call for that list to be updated to the benefit of Canadians, pure and simple.
The second issue is this arbitrary 150 unitholder threshold for a unit trust to be a mutual fund trust status. Rumour has it that this 150 unitholder number was concocted by a representative of the Department of Finance in a restaurant many years ago in Ottawa, but it just doesn't work for pension plans in the institutional world.
The reality is that most commercial trusts are formed to manage money. The reality is also that it's efficient to manage similar accounts in the trust, and institutions like to do it. Moreover, for certain asset classes that are a small percentage of total portfolio—emerging market equities or high-yield debt—the only way to invest in them to get diversification is through a trust.
Now what is mutual fund trust status? A unit trust with that status has about 16 different benefits under the act. It's eligible for an RRSP. A 149 unit trust is not, but 150 is. It's a little ludicrous, but that's just the rule. It gets benefits: the capital gains refund mechanism, alternative minimum tax, and it can do non-taxable mergers. There's a host of things not to go through here.
In an institutional world, many funds will not be able to meet that threshold. Moreover, the manager of a fund that's up and running but suddenly loses an investment faces immediate tax and restructuring issues to the detriment of remaining holders, many of whom have pension plans. So we would call for that to be changed.
The last issue—realizing time is short—is the proposed FIE-NRT rules. These are complicated rules. They were drafted in June 2000, then amended August 2001, and again in October 2002, October 2003, and June 2005—and deemed to have retroactive effect from January 2003.
It's incredibly intense. There is an administration that is unduly pushing costs on Canadians, and it's a disincentive for people to invest abroad to their long-term benefit. These rules apply to pension plans that shouldn't even be subject to the tax regime. They are viewed like the gun registry system. There is almost $2 trillion out there in investable assets, and this needs to change.